Question

The comparative balance sheets of Montgomery, Inc. at the beginning and the end of the year 2020 are as follows.

Net income of $47,200 was reported, and dividends of $27,680 were paid in 2020. New equipment was purchased and none was sold.

Prepare a statement of cash flows in order to provide the following information:

1. Net cash provided by operating activities

2. Cash flows related to investing activities

3. Net cash from/used by financing activities

4. Cash at the end of the year

Answer 1

Solution

Cashflow Statement of Montgomery, Inc.,on 31/12/2020

Net cash Flow from Operating Activities =$47,200

Less :- Net cashflow from Financing activities = $ 27,680

(Dividend paid)

Less :- Net cashflow from Investing Activities = $0

(New Equipment purchased)

Cash at end of the year =$47,200 - $27,680 -$0 = $ 19,520

Note in the question told that New Equipment was purchased but amount not specified , If value is available please add it in the Investing Activities Row and Subtract it from cash at the end $19,520 the resulting figure is Cash at the End

Otherwise please comment, i will try to add the new answer

Dividend paid is a Financing activity because we are borrowing money from other

Purchase of New Equipment is a Investing Activity because we are investing on one asset